Investing with BUSSQ

When you invest with BUSSQ, you can enjoy the choice of a number of different investment options. There are options to suit many variations and needs, whether it be time frame, risk tolerance or just overall preference. Our default option is the Balanced Growth option which has a long history of providing good returns, well above the rate of inflation. Whilst it suits many of our members, it doesn’t suit all.

We find that some will choose from our single asset class options if they have other investments outside of super. For example, you may want to create a diversified portfolio overall, and you may already have investment property outside of super. It could be worth considering using your BUSSQ account to invest in other asset classes such as local or overseas shares, or diversified fixed interest, government and local government bonds etc. This can help give you a broad, diversified portfolio which often helps to reduce the risk of putting all your eggs in the one basket.

You should remember, when making an investment selection, that whilst past performance may help to guide you to some extent, past performance may not reflect future performance. Chasing last year’s returns because they happened to be great may not give you the same result. It is generally better to have a longer term view as an investor, rather than a shorter term view as a speculator.

You should consider that investments are broadly categorised in two areas – cash and fixed interest are considered shorter term investments, whilst property and shares are longer term investments. Australian shares have generally had a history of good returns over the longer term, but as a country, we are a small player in a big, wide world. We make up about 2% of the worldwide markets.

Case Study

Bob's Current Situation

Bob is 50 and has a BUSSQ Super account with around $175,000. He is single, and hopes to retire at age 65. He’s invested quite conservatively.

As he is getting closer to retirement, he is worried that he will not have enough money to enjoy life after work. It’s a question we often get asked 'will I have enough money to retire?’

Bob is spending about $45,000 a year and expects that he would spend about the same in retirement. He’s paid off his home loan, so his $80,000 (or $60,800 after tax) annual income goes mostly to living costs and entertainment.

After some financial advice

After meeting with a BUSSQ Financial Planner and talking through his situation, it was clear Bob would not have the amount of money he had hoped for in retirement.

There were 3 options suggested to him to ensure he has enough:

Work longer and retire beyond age 65

Make an investment choice to increase his investment return potential, or

Save more now and reduce spending in retirement

Understandably, he wasn’t keen on the first option of working longer.

However he saw that taking up option 2 and making an investment choice would be easy. With some advice he chose to invest in growth assets instead of the conservative investments he was currently in. He found his average investment return went up from around 6% per year to 7% per year. This helped boost his super from $375,000 up to $417,000 when he reached 65. This would generate an income increase (in today’s dollars) from $38,000 per year up to $42,500 per year. He wanted to make sure he had funds that lasted at least until his life expectancy, which is around age 82. Drawing this amount from his account means his money would run out at around age 86.

He realised however, that this would not be enough, he would also have to save more to put into his super now. In order to grow his super enough to give him $45,000 a year (including his Centrelink entitlements at pension age) he would need to save around $5,000 a year which would be via salary sacrifice. These two steps – changing investment options and adding a little bit of his salary to super means he will meet his required $45,000 a year in retirement and have a super balance of about $483,000 – an increase in his balance of $108,000!

By taking action he has $108,000 EXTRA FUNDS in retirement!

So, by getting some financial advice through BUSSQ, Bob was able to take action to meet his goal of having enough super and maintaining his comfortable lifestyle in retirement. He is also able to enjoy life leading up to retirement with a small adjustment in savings and investment habits.

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